Using NDAs to Protect Inventions, Creative Works and Trademarks

Trade
secrets are part of a family of law known as intellectual property, which
also includes patents, copyrights and trademarks. The types of intellectual
property protection are not discrete and often overlap. For example, a
process of transporting eggs on a conveyor belt can be a trade secret until
it is disclosed during the patent application process. Once a patent is
issued, the process is public but protected by the patent. A television game
show about survivors on a desert island may be copyrighted but the name of
the winner may be a trade secret until announced on the air. Below we
discuss how NDAs are used when trade secrets, patents, copyrights and
trademarks overlap. We discuss these issues below but for more detailed
information on trade secrets and related intellectual property issues,
consult Richard Stim's
Patent, Copyright & Trademark.

Utility Patent

There are three types of patents—utility patents, design
patents and plant patents—but we will discuss only the most common, utility
patents, which protect any novel and useful invention. (You can learn more about design patents, here.
) The term “invention”
is quite broad and includes anything under the sun made by humans except for
abstract ideas. Utility patents can be granted for a process (such as
sterilizing surgical equipment or a method for collecting sales data on the
Internet); a machine (such as a gearshift in a rowing machine); an article
of manufacture (such as a pencil or a garden rake); composition of matter
(such as Teflon or WD-40); or an improvement on an existing invention.

A patent allows the inventor the exclusive right to stop
others from making, using and selling the invention. Patent attorney David
Pressman, in his book Patent It Yourself (Nolo), calls the utility patent a
“hunting license.” It gives the inventor the right to hunt infringers and
sue for damages and other legal remedies.

A utility patent is obtained by filing a patent
application with the U.S. Patent and Trademark Office (PTO), meeting the
standards of that agency’s examiners and paying the appropriate filing,
issuance and maintenance fees. The Patent and Trademark Office will not
consider an invention novel if the application for the patent is made more
than one year after sale, public disclosure, use or offer of sale in the
United States, or if it is patented anywhere in the world. In other words,
you have one year from the first sale or public disclosure to file your
patent application!

novel—that is, it must differ in some way from the
publicly known or existing knowledge in the field of the invention; and

nonobvious—that is, persons working in the field of
the invention would consider the invention unexpected and surprising.

Should You Apply for a Patent or Keep Your Secret
Information Secret?

Everything that qualifies for a patent also can qualify
as a trade secret. However, you can’t have both patent and trade secret
protection simultaneously because the patent process requires, at some
point, public disclosure of the invention. If you have a patentable
invention, you must decide whether to seek the powerful protection of a
patent or to maintain the invention as a trade secret. Here are some
considerations:

Patent protection lasts for approximately 17 years;
trade secret protection lasts for as long as the material remains
secret.

Trade secret rights can be acquired immediately, but
it often takes several years to acquire a patent.

Trade secrets can cover more information than a
patent, which is limited to one general statement of the invention and
its details.

Patent protection allows you to stop anyone from
making, using, or selling the invention; a trade secret owner can stop
only those who acquire the secret improperly.

If you don’t patent an invention, and someone else
legitimately does, that person may sue you later for patent infringement.
Patent laws provide some defenses but it is very possible that you could be
liable for patent infringement.

Many companies use NDAS to protect their patentable
inventions or processes as trade secrets in the initial stages of
development and then seek patent protection. A patent application is
published verbatim when the patent issues or earlier, as discussed below,
and at that point all of the trade secrets and know-how become public. This
public disclosure doesn’t usually hurt the inventor, because the patent can
be used to prevent anyone else from commercially exploiting the underlying
information.

Every pending patent application filed on or after
November 29, 2000 is published for the public to view 18 months after its
filing date (or earlier if requested by the applicant). The only exception
is if the applicant, at the time of filing, informs the PTO that the
application will not be filed abroad. If the patent application is published
and later rejected you will be in the unfortunate position of having lost
both trade secret and patent rights.

If you file a patent application and want to keep it as
a trade secret even if the patent isn’t granted, you will have to withdraw
the application before publication to prevent loss of trade secret status.

You may not need to disclose all your trade secret
information when you apply for a patent. For example, you could keep
confidential the research method by which you arrived at your conclusions or
test results.

Trade Secrets and Copyrights

Copyright protects writing, music, artwork, computer
programs, photographs and other forms of artistic expression. Under
copyright law, the creator of an original work (known as the author) owns
the exclusive right to make copies and to prevent others from copying the
work or creating a derivative work (a work that is derived from or based on
the author’s protected work).

Copyright and trade secret laws sometimes protect the
same kinds of information and sometimes are mutually exclusive. Usually, the
same protection cannot exist simultaneously because copyrightable works are
commonly distributed to the public or publicly displayed, thereby ending
trade secret protection. However, trade secret protection may exist for
copyrightable works that are not published or displayed.

Copyrights, Trade Secrets and Software

Trade secret and copyright protection may both be
available for works that are distributed on a restricted basis under a
copyright licensing arrangement requiring the licensee (user) to recognize
and maintain the trade secret aspects of the work. This dual protection is
pertinent for computer software because the distribution of a software
program does not require disclosing all of the software code. The
undisclosed code is a trade secret and is protected because a user commonly
signs a license agreement promising not to divulge secrets in the program.
Trade secret protection is generally not available for software if the
source code is made available to the public on an unrestricted basis—for
example, in a computer magazine or on a CD.

Copyright

Trade Secret

What’s covered

any original fixed work

valuable business information that is not generally known or readily
ascertainable

You automatically own the copyright for any original
work, even if you don’t register your copyright with the
U.S. Copyright
Office. But because registration offers benefits, most people want to
register their copyright, which requires sending a copy of the work to the
Copyright Office. Once you do that, your trade secret is out unless you in
some way mask the trade secret. For instance, it is possible to deposit
samples of source code with major portions blacked out so that the parts of
the code being maintained as a trade secret are not disclosed. There are
several other methods for simultaneously registering a computer program and
maintaining trade secrets. One common way is to withhold the source code
altogether and deposit object code, which is impossible to understand when
read in the U.S. Copyright Office.

Database Protection

Copyright law protects unpublished and published
collections of information such as databases if the material is arranged in
a creative manner. For example, a typical white pages phone book will not be
protected because there is no creativity in alphabetizing names. Trade
secret law does not require creativity in order to protect databases. A
database will qualify as a trade secret if the information is not generally
known or readily ascertainable.

Trademark law protects the right to exclusively use a
name, logo or any device that identifies and distinguishes products or
services. In addition to names and logos, trademark law can be used to
protect trade dress and product configuration. Trade dress is the product’s
packaging—all the elements that give your product or service’s appearance an
identifiable quality, such as the combination of color, geometric shapes,
imagery and lettering on a pain reliever bottle. Product configuration
refers to the shape or design of your invention—for example, a distinctive
oval-shaped stapler.

Trademark rights are not created until the public has
been exposed to a product or service and its trademark, usually by its first
use in commerce. That means an NDA cannot protect a trademark that is used
in commerce or that is the subject of a federal trademark application
published by the United States Patent and Trademark Office. An NDA can,
however, protect a potential trademark—that is, a name or logo that a
company plans to use—that has not been publicly disclosed.

Click
to see a chart comparing copyrights, trademarks, patents and trade secrets.